An Explanation For Why Verizon Is Driving DSL Users To Competitors' Cable Lines

from the dumping-dsl dept

Karl Bode has an interesting story explaining how Verizon is willfully pushing its DSL customers over to cable broadband "competitors." It's worth reading the whole thing, but the short version is that Verizon wants desperately out of the DSL business. Now, some of that is to drive people to its popular FiOS fiber service. However, the company has basically stopped expanding FiOS entirely. The fact that most of the competition is gone couldn't possibly have anything to do with that, right? But the bigger vision appears to be to push people over to the company's wireless solution, LTE. Bode suggests a few reasons for this, with a big one being that LTE is much more expensive, and has relatively low caps and high overage rates. In other words, it makes a lot more money for Verizon, but is much more limiting for users (there's also the bit about how it switches from a "unionized" business to a non-unionized one).

In other words, Verizon will cut off copper in FiOS markets first (which makes sense given the lower maintenance costs of fiber). They'll then leave users in DSL-only markets un-upgraded, forcing them to buy a costly landline so that remaining on Verizon DSL becomes less attractive. Those customers will flee to the same cable companies Verizon just signed a massive new partnership with, with Verizon planning to sell those users more expensive LTE connection later. Verizon will continue to "compete" in FiOS areas for now, if you call winking and nodding when it's time to raise prices competition.

Rural areas could see the biggest impact from the shift, as Verizon pulls DSL and instead sells those users LTE services with at a high price point ($15 per gigabyte overages). Verizon then hopes to sell those users cap-gobbling video services via their upcoming Redbox streaming video joint venture. Expect there to be plenty of gaps where rural users suddenly lose landline and DSL connectivity but can't get LTE. With Verizon and AT&T having killed off regulatory oversight in most states -- you can expect nothing to be done about it, despite both companies having been given billions in subsidies over the years to get those users online.

The entire amazing transition becomes clearer still when looking at Verizon's quarterly earnings posted yesterday. The company added a whopping 3.2 million LTE users during the second quarter, a record for the telco. In contrast, thanks to a frozen FiOS expansion (with the exception of franchise obligations in urban markets) and their disdain for DSL, Verizon managed to add just a net 2,000 broadband users in the quarter, despite adding 134,000 FiOS users. Verizon CFO Fran Shammo gave several excuses during yesterday's conference call ranging from the economy to aardvarks -- but the reality is that DSL users are fleeing in droves, and Verizon wants them to.

Now, there is something reasonable about a company actually being willing to cannibalize its own older offerings with something more modern. But a key warning sign that something is wrong is that they're not moving customers to something that's better and cheaper -- which is what you normally see in a truly competitive, innovative market. Instead, they're moving them to a more limited, more expensive offering. That's what you tend to see when there's not nearly enough competition in the market, and a few established players whose customers have little choice.

LTE right now is a bit spendy, mostly because it's the new technology and they are paying to get it set up. However, just like everything else, it should come down in price over time, especially if they have some competition in those areas.

On the landline side, while the equipment is "paid for", the maintenance is high. As consumers are moving away from landline service to wireless for their phones, it becomes less and less desirable to keep all this copper infrastructure in place and to maintain it.

My guess (I don't have studies, sorry) is that they are aiming for a lower cost per installation in the long run. Wireless can be maintained with less people, and the costs of adding more subscribers (especially in rural areas with long distances to run cables) should be lower.

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Which would make sense....if Verizon didn't have a near-monopoly status. That allows for the nicely-timed "price rises cue to increase in costs" amongst all the providers. I do, however, see your point about cost/install.

Maybe they've developed a conscience...

And decided to give Sonic.net's gigabit service a push by garnering "anti-establishment" sentiment. Forcing customers to move to a provider with better service at lower prices and which actually cares about its customers is kind of like promoting healthy competition, right?

As a former Verizon DSL customer ...

...this article seems correct about Verizon driving away DSL customers. After FiOS became available the quality of the DSL service seemed to plummet until it was eventually unusable. I always assumed it was to drive users to FiOS, which it did. The method seemed to be a complete lack of maintenance on the DSL equipment. Eventually everyone in my neighborhood switched to FiOS or Comcast. Have to admit that while I don't like Verizon as a company, I have no complaints about the FiOS service.

Simple economics

This one is pretty easy to understand. The LTE service is so much more expensive and lucrative for Verizon that it is actually worth it to end DSL service and let the cable companies have those subscribers.

It's not much of a long term plan since the cable companies are always looking to skim telco subscribers and I can't imagine what Verizon will do when MVNOs eat into their market share.

Sounds like some greedy bastard at Verizon asked himself how to make the most money possible in the shortest time at the expense of their user base.

Having recently upgraded to a Verizon 4G LTE phone I find this whole mess stupid. I changed over to a new Razr just before the changes Verizon made to prevent people from keeping unlimited data. So I am now one of those lucky ones who jumped through some loopholes to get 4G and unlimited data.

With this I started looking around and doing some tests. The results kind of shocked me honestly. When I got the phone I did not realize how fast 4G can go and was amazed doing a speed test on the phone I got a download speed of 37Mbs.

I then sat there a bit shocked and started to do a bit of math. Verizon with their current plans top out at 10GB a month at a cost of $100 extra a month. 10GB at 30Mbs takes little over 50 minutes to burn.

So they are selling you broadband that if you actually use it for 1 good hour out of the month you have used all your data and went WAY over. What kind of plan is that?

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However, just like everything else, it should come down in price over time, especially if they have some competition in those areas.

If they have anything to do with it, there won't be any effective competition in the future, just like there isn't much effective competition right now.

In any case, please let me know when prices have ever come down in these markets? We're always given this "prices will come down when the startup costs are covered" line, but I've yet to see it happen except in markets where there is a large number of competitors, of which this isn't one.

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At some point they'll overload the spectrum they have with LTE. However, if they laid out fiber, they'd have an extremely large amount of bandwidth with lower maintenance costs and could easily service a large number of customers at varying levels of speed with less investment.

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It's a nice idea, but you are forgetting the costs involved in getting fiber to rural customers. You can run miles of cable to serve a single household. Then you have to maintain it.

They are almost certainly laying out fiber to the towers. If they get somewhat overloaded, they can always add another tower.

Going with the tower solution also allows them to upgrade their network without having to work at both ends of the last mile. They can add new services (5G, when it comes along, example) much more easily.

It also shifts a certain amount of responsibility to the end consumer for the equipment they will use.

I am not seeing the less investment in doing the last rural mile in fiber.

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In any case, please let me know when prices have ever come down in these markets? We're always given this "prices will come down when the startup costs are covered" line, but I've yet to see it happen except in markets where there is a large number of competitors, of which this isn't one.

Especially when many of the start-up costs were covered by the government through tax money and shadow taxes. E-911, which we all paid multiple times for, seems to have disappeared without being fulfilled. And the access taxes which have disappeared without providing the services that they supposedly paid for, as well as the other stuff pulled by the telecoms have basically been pocketed by them, with no oversight and no enforcement to provide the services that they promised to deliver. And don't get me started on the taxpayer money given to the telecoms to build the "Information Superhighway."

Truth is, they've been screwing us forever, and nobody in authority has been able to stop it (likely because of kickbacks and bribes,) and there is nothing to show that they won't continue to screw us forever more.

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"So they are selling you broadband that if you actually use it for 1 good hour out of the month you have used all your data and went WAY over. What kind of plan is that?"

It sounds bad, until you think a little bit. Most people don't download at a constant "top speed". Most web surfing is high transfer for a short period of time, followed by an extended time of no transfer as the user reads the web page.

Mail, messaging, and the like are all light on bandwidth.

10 gig of mobile is actually quite a bit of bandwidth - unless you are into doing some stuff that really hogs bandwidth. Then you might consider not doing that stuff on mobile.

Re: Deregulation

The problem with the competition argument is that, setting aside whether or not the wireless market should have more competition than it does, wireless certainly has more competition than wireline. Wireline access really is a duopoly everywhere, regardless of the number of overall companies, because of franchise agreements.

So Verizon is essentially pushing people away from a less competitive but regulated market into a more competitive market. That's pretty difficult to square with the idea that Verizon and AT&T have "killed off regulatory oversight." It would be more consistent with an idea that regulatory oversight is so strong (and holding down profits) that Verizon would prefer to exit that market.

And yes, there have been tons and tons of subsidies of rural phones over the year. That doesn't change the fact that rural service is really expensive to provide-- and that most of that rural subsidy actually goes not to Verizon and AT&T, but to smaller local phone monopolies. (Verizon and AT&T actually pay those companies the subsidies through FCC set interchange tariffs that subsidize smaller carriers.) Perhaps as a country we should stop spending lots of money subsidizing people who choose to live out in the middle of nowhere. It's a silly subsidy (and not good for the environment either.) But eliminating the subsidies seems as unlikely as eliminating the rural subsidy that is Essential Air Service, which McCain and other Republicans tried to eliminate and failed. (This was a vote to table the Amendment, so a NO vote was to eliminate the subsidy.)

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Rural are easy. Several years back there was a GPON case study where a small ISP in Minnesota rolled out fiber across a 2,000 mi^2 chunk of land. Most of the population is spread out with an average of around 5/mi^2, which is close to farm land.

They were turning a profit after only 2 years.

Most of the cost isn't the fiber, it's the equipment installed at the customer's home.

In the "average" gpon installation, the end points are almost 70% of the cost, with the rest being laying the fiber and the datacenter gear.

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That's a nice thought, except that in the rural areas where they are really pushing customers off DSL, there usually isn't competition beyond the big 2, especially when it comes to wireless data. And in some places, there is NO wireless data available at all, so wireline is the only option, unlass they go to satellite data, which is insanely expensive.

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I can't, verizon turned off my DSL even though I am right next door to one of their main switching stations in this state, they feel that its not cost effective to put Fios in this part of the state. Now I need to wait for Xfinity to come and install a splicer so they can ad a line for me rather than running a new line because its cheaper for them.

Re: Re: Prices coming down?

Actually, if you look at the FCC reports, or the CPI, cellular service and phone services have, compared to inflation, especially on a per-minute basis.

It's a little more complicated with Internet and data service, because the average throughput has increased so much. That makes it difficult to compare like to like. NetZero still offers a free plan for under 10 hours of use, and a $9.95/month plan for modem access. But I suspect that you want to compare to modern fastest speeds.

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If there's NO wireless data available somewhere, then Verizon clearly isn't trying to push people onto LTE in those areas. They're simply trying to get out of the DSL business.

I think that your comment only reinforces the idea that Verizon is trying to get out of the DSL business because it's inefficient and unprofitable. They're willing to get out of the business even when they're not going to move anyone to LTE.

It's the same reason that they got out of the local phone business in rural areas. They sold that business to other companies. It's not about specifically pushing people to another product; it's about getting out of an unprofitable business.

In those same rural areas, LTE is pretty expensive for them to deploy as well, though less expensive than wireline.

I feel like we will have reached a critical mass (of corruption) if the Verizon Cable-Spectrum deal is approved and allowed to happen and undoing the damage will be 10x harder than if we started right now.

Re: Re: Re: Prices coming down?

"NetZero still" yes they still offer the same package at teh same price they did 10 years ago. However if I try to use my broadband connection as much as I did 3 years ago I will go over my cap and end up paying them hundreds of dollars extra.

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No. No. No. And No.

Firstly, it is proven that everyone having access to internet is very beneficial for the economy.

Secondly, wireless is not only extremely expensive ($15 per GB overages) but it is also an area where competition is equally non-existent. In most areas you have one maybe two companies with decent data networks. In several you have zero.

Thirdly, living out in the middle of nowhere is not optional for everyone. Although I can see how people living in major cities cannot possibly comprehend this, the fact is people who have farms, land, etd. need to be able to access their property as quickly and easily as possible. There are countless reasons for this, but it is safe to say that living in the country is not optional for everyone. And if a person had to drive 20 or more miles out from a city to get to their farm several times a day, something tells me the pollution problem would be worse.

And finally, Verizon does not plan to cut off just rural areas. They plan to cut all copper lines over time, including entire towns and cities. Many of these towns and cities and even the rural areas are within states and areas where Verizon was given special treatment in exchange for a full an upgraded copper or fiber roll-out that never happened. Verizon has broken the law by charging for extra fees and avoiding taxes per agreements that they backed out of.

Re: Huh? Prices will go down...

Prices will go down when the build-out is complete? Nonsense. The cable system in my town has been built-out for years with capability for at least 100 Mbit/s internet and hundreds of SD and HD cable channels. Prices to me keep going UP, not down. Of course, Comcast claims it's because content producers keep asking for more money. Take a look at Dish's recent experience with AMC networks and DirecTV's problems with Viacom. Prices have continued to increase in FIOS areas for both Internet and TV, although it's stopped installations.

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The problem with cell internet is, its not good for gaming. its not good for remote access to repair field systems (trust me I know) and its costly. Businesses wont like it, and as Verizon wont be spreading FIOS they will be pissing off customers. I could never use my portable hot spot to run my home systems. online gaming and my streaming would run the cost of it to a point where it would cost more to stream and play games for a few hours a day than it does for me to go out and be social. being social causes me stress. Stress makes me moody and when i am moody I hurt things, verizon is trying to make me hurt things...

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The major difficulty with wireless communications is that there is only so much effective bandwidth available if you're transmitting over any reasonable distance, especially if you're broadcasting non-directionally. I'm going to avoid going to much into the physics behind this, so I'll put it simply. Every user has to share the same airspace, and there are limitations on the frequencies you can transmit over long distances due to atmospheric absorption as well as what will transmit well through common building materials. The bandwidth available for LTE users has to be shared among all LTE users within the transmission region.
Whereas with wired communications like copper and fiber optics, as long as you can properly shield parallel cables from each other, you can add additional bandwidth quite easily by laying another one right next to the existing bundle. With wireless broadcasting you would need to add a parallel spacetime to achieve that effect. In the case of fiber optics, we're still very capable of upgrading bandwidth on existing cables simply by swapping equipment at the endpoints for models capable of signalling at higher frequencies.
Of course, if one installed wireless access points with very short ranges, say within a single house, there is no such issue with wireless. This is why it's probably possible for Americans to use petabytes per second of bandwidth just using existing wifi networks.
If non-directional wifi-like networks were expected to cover much larger ranges, that wouldn't be possible, since there simply isn't enough bandwidth in the air.

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If people used LTE to cover the same usage as wired communications are used now at homes, it might work okay in *very* rural areas.
However I would be extremely impressed if Verizon managed to achieve the same thing anywhere near a large city. Back of the napkin calculations say that they would need to space low-power transmitters about as far apart as typical wifi access points or amend the laws of physics.
Basically, it would either be a miserable failure or people would be stuck having to chose which one Youtube video to watch this week and do so when there's low network demand.

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Oh I doubt it'll be reported. Note the correct term used for what happens to comments that are off topic or seen as obscene by the community. Your comment, however, which adds nothing to the conversation beyond the standard AC ad hom remarked aimed at the TD readers though stands a much higher probability of being flagged by the community. Off topic, nothing to add to the conversation, and an ad hom too.

You're not the idiot who still thinks that censorship means it can still be seen with the click of a button are you? Based on your moronic comment, you are. So no real need to answer that. Hint: Censorship means unviewable. Period.

You trolls used to try. [shakes head in disappointment] Have we put your in your place that much that now you can't even try anymore? Tsk tsk.

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Mail, messaging, and the like are all light on bandwidth.

And none of them are better because they're happening over faster pipes. So, I think Machin's implied point is still a reasonable one: if you do things which are really better over faster pipes, the usage caps will still bite you.

It actually could be an effective anti-piracy tool. Like Comcast doesn't add its movie offering to bandwidth caps it enforces higher costs on those pirating content (and utilizing another's legit content). The smart way to fight piracy would be for the telcos to agree to not count legitimate sources toward bandwidth caps and pound people on overages.

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The problem with the competition argument is that, setting aside whether or not the wireless market should have more competition than it does, wireless certainly has more competition than wireline.

I don't think that's true, at least not in my neck of the woods. If you want wired broadband, you have two options: cable or DSL. That's two competitors. If you want wireless, you have two options: AT&T or Verizon.

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I'm sorry but the " Then you might consider not doing that stuff on mobile." solution does not work well for me. I'm paying for a service and I'm going to use the service. It is stupid to market such a broad band connection with such a limit.

What is the point of 4G if all you are doing is mail, messaging and the like? Yes they don't use much bandwidth and will keep you under your limit but if that is all your doing WTF are you paying for high speed for? Can do all those things very well on 3g.

They are offering a service that has great potential (a potential I am greatly enjoying) and then limiting it so people cant use it. You know, like how I can watch netflixs in full HD on my phone...

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And who decides what "legitimate" means? This sounds like a way for the major movie studios and record labels to effectively force filmmakers and music artists back into their system, so they can control the industry again at the expense of artists. If artists can distribute effectively on their own, distributors have to treat them well or lose them. If the only reasonable options for artists to distribute with are a few oligopolists, then there's no reason to treat artists well. Artists lose, and audiences lose.

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The other BIG issue with LTE or any wireless data is RELIABILITY. I would not want to try to run a home office using LTE until I know that the carriers can guarantee me the 5x9 reliable uptime for data transmission that I get with voice service.

Municipal Broadband

It's companies like Verizon that make it necessary for municipalities to issue bonds measures to roll out their own broadband network. Rural areas need to take care of themselves in terms of internet access because the conglomerates won't.

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"unfortunately, "the people who grow all the food" are corporations mostly"

Actually, only about 5% or less of all farms are corporate, producing about 15-20% of the food. If you get way out in the sticks, you'll find most everybody growing something, even if it's just tomatoes and peppers for the local market.

Re: Municipal Broadband

In Oregon Verizon sold to Frontier. Frontier is now making it difficult and very expensive to sign up and use the FIOS services. They are even encouraging people to sign up for satellite tv instead of using their FIOS tv offerings.

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The end of a long relationship

I have 2 choices, always did, just my luck I chose the wrong one. 15 years with verizon and they decided to screw me for an additional 2 years (a contract)(they called it something else)and they made a extra $480. In 2 months these 2 years will be over, and so will verizon fios.

We realize you have choices when it comes to your broadband services. Thatís why we would like to take this opportunity to say thank you for being a loyal customer and for choosing Verizon as your broadband provider.

We hope you understand that to maintain our broadband networks, from time to time we need to increase our rates. Your monthly rate will increase from $37.95 to $36.99 (not including additional services or, taxes and surcharges) and will be reflected on your bill within the next two months. The new rate will remain in effect for one year.

If you would like to review your account to see if you may qualify for savings by taking advantage of our bundles or if you have any questions, please log on to myverizon.com or give us a call at 1.888.214.3354.

To keep your current service as is, no action is required, and any credits or discounts remain in effect until their original expiration date. If you have recently upgraded to a new plan, please disregard this letter.

Thank you again for your business and we hope to serve you for many years to come.